Why Hype Killed So Many Startups in 2013 ~ Ryan Holmes in the WSJ

Photo by Heisenberg Media.
Photo by Heisenberg Media.

This article first appeared in the Wall Street Journal. You can view the original here.

Underpromise and over-deliver is a tried and true business adage. But in 2013, startups found ways to do exactly the opposite.

Last year was filled with overhyped, sensationally promoted new companies that flopped, spectacularly. At times, it seemed the Valley’s biggest names were lining up to attach themselves to visions that were half-baked at best.

To be fair, that’s nothing new. A 2013 study of 2,000 venture-backed startups by Harvard Business School found that 75% failed to provide a return for investors. And big hype and ill-advised beta releases have a long, sometimes venerable history in tech. When Steve Jobs first unveiled the iPhone in January 2007, his prototype was so buggy it would crash every time a video played, randomly dropped calls and couldn’t hold a Wi-Fi connection. But that’s Steve Jobs. For the rest of us, launching with inferior product probably isn’t the best business model.

Part of the problem may be that, after an especially spectacular tech IPO in 2012, the Valley is flush with cash and some of its brightest minds are now eager to get back in the startup game. A cadre of well-heeled alums have attached themselves to multiple companies as founders, angels and advisors. They’ve hired a lot of smart people and raised a lot of money.

But the fact is many of these folks – as brilliant as they are – have never gone through the motions of starting and building companies themselves. So they may not have internalized the entrepreneurial reality that failure – in fact, repeated failure – almost always precedes success. The first iteration of a product or service is rarely the best.

So we get yet another gala, celebrity-filled launch and yet another offering that just tanks.

There’s nothing wrong with pivoting and going back to the drawing board, of course. My point is that all of this should come before the fanfare and promotion. Building outrageous expectations about the next big thing – be it a personal video chatting service or venue-based photo sharing app – can create all sorts of complications when things don’t go as planned. You’ve made a terrible first impression for starters, which can kill adoption rates and investment opportunities down the road. But you’ve also locked yourself into a vision that may be self-limiting or shortsighted.

The alternative is obvious; in fact, it’s really the only option for the majority of startups that don’t have big-name backing or investors. Hammer down product fundamentals first. Make sure you’ve got something that works before doubling down on promotion and marketing. Create a groundswell of organic support and only then leverage PR and advertising to spread the word.

HootSuite never had a big launch. We were lucky to even have office space. Early on, we focused on turning a useful little hack for managing multiple social media networks into a solid tool. For months, we beta-tested changes with select groups of users, working out bugs on a small stage. At the same time, our analysts religiously tracked k-factor – the all-important measure of viral adoption. It was data-driven; it was repetitive and frustrating; and it was invaluable.

Meanwhile, rather than invest in advertising, the company cultivated relationships directly with the people who actually used our product – bloggers, social media managers and community directors. Part of this was necessity; we had no revenue and no ad budget. But it was also strategic. Many of these users became our biggest evangelists, generating the kind of grassroots enthusiasm advertising can’t match. In fact, it was three years before we bought our first ads.

By that time, we were ready to tell our story to the world. The product worked. It had its champions. Then, and only then, was it time to shift the marketing machine into high gear. Had we been saddled from the start with huge media expectations, pushy investors or celebrity backers (no offense, Ashton), it’s scary to think what HootSuite would – or, more likely, wouldn’t – have become.